WLKP

Westlake Chemical Partners LP - 10-Q Summary (Q3 2025)

Business Context and Reporting Period

This report covers the quarterly period ended September 30, 2025. Westlake Chemical Partners LP (WLKP) is a Delaware limited partnership that operates, acquires, and develops ethylene production facilities. The Partnership owns a 22.8% limited partner interest in Westlake Chemical OpCo LP ("OpCo"), which owns three ethylene production facilities (Petro 1, Petro 2, and Calvert City Olefins) and a common carrier pipeline. Westlake Corporation retains the remaining 77.2% interest in OpCo and serves as the primary customer, purchasing the majority of the Partnership's ethylene production under a long-term fee-based agreement.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Mix: Q3 2025 net sales increased 11.5% year-over-year, driven by a 12.0% increase in average sales prices to Westlake, partially offset by a 0.5% decrease in volume. However, for the nine-month period, total sales were flat (-0.3%) due to lower production volumes from the Petro 1 turnaround, despite higher prices and a $13.6 million buyer deficiency fee.
• Margin Compression: Gross margins declined significantly (from 42.2% to 32.2% in Q3) due to higher ethane feedstock and natural gas costs. Feedstock costs rose 47.4% and fuel costs rose 45.2% compared to the prior year quarter.
• Profitability: Net income attributable to the Partnership decreased by 19.2% in Q3 and 27.9% for the nine-month period, reflecting lower third-party sales prices, higher input costs, and reduced volumes.
• Cash Flow: Operating cash flow for the nine months ended September 30, 2025, dropped $192.4 million compared to the prior year, primarily due to cash used for the Petro 1 turnaround and lower operating income.

Guidance, Outlook, and Management Commentary

• Turnaround Impact: The Petro 1 facility turnaround extended into April 2025, later than the planned March completion. This resulted in a forecasted annual production deficiency, triggering a $13.6 million buyer deficiency fee recognized in Q2 2025 (receivable after year-end).
• Contract Renewals: On October 28, 2025, OpCo and Westlake renewed the Ethylene Sales Agreement and Feedstock Supply Agreement through December 31, 2027. Amendments were also made to the Services and Secondment Agreement and Omnibus Agreement to align expiration dates.
• Distributions: A quarterly distribution of $0.4714 per common unit was declared for Q3 2025, payable November 26, 2025. This distribution did not exceed the threshold for Incentive Distribution Rights (IDR) payments to Westlake.
• Liquidity: The Partnership maintains $37.9 million in cash and $13.4 million invested under the Investment Management Agreement. It has access to $600 million in revolving credit facilities (OpCo and MLP Revolvers) with Westlake, with $399.7 million currently outstanding.

Investor Verification Checklist

• Buyer Deficiency Fee Timing: Verify the collection schedule for the $13.6 million deficiency fee, as it is scheduled to be received after December 31, 2025.
• Feedstock Cost Volatility: Monitor ethane and natural gas price trends, as these are the primary drivers of gross margin compression.
• Turnaround Schedule: Confirm the completion status of the Petro 1 turnaround and its impact on full-year 2025 production volumes versus the budget.
• Debt Covenants: Review the Consolidated Leverage Ratio to ensure compliance with the MLP Revolver covenants (maximum 4.50:1.00).
• Contract Renewal Terms: Review the specific pricing mechanisms and minimum purchase commitments in the renewed Ethylene Sales Agreement extending to 2027.